The Madras High Court has come down hard on Tamil Nadu Salt Corporation for dodging arbitration proceedings, slapping it with ₹1.5 lakh in costs after dismissing its challenge to an award passed under the Micro, Small and Medium Enterprises Development Act, 2006.
Justice N Anand Venkatesh, calling the petition “devoid of merit,” observed that the Corporation was given ample opportunities at both conciliation and arbitration stages but chose to sit it out entirely. The result — an ex-parte award in favour of Aero Plast Limited, which the Corporation later tried to overturn on procedural grounds.
The judge was unpersuaded. “Had the petitioner appeared before the Council, there would be justification to refer the parties for mediation. In the absence of the same, the Council had no other option except to refer the matter to the sole arbitrator,” the Court said, refusing to entertain belated objections over the tribunal’s composition and alleged lack of conciliation.
The dispute stemmed from a 2015 tender for laminated pouches to pack iodised salt. Aero Plast claimed it supplied material worth ₹2.78 crore, but was paid only ₹2.39 crore — leaving a ₹39.04 lakh shortfall. Notices were sent, but TN Salt stayed silent. The Facilitation Council finally referred the case to a sole arbitrator, who ordered payment of ₹39.9 lakh with interest.
In Court, TN Salt argued that the award was “non-speaking,” that its contract required a three-member tribunal, and that no conciliation had occurred. The Court brushed aside every contention, holding that Section 18(3) of the MSMED Act clearly overrides any contractual arbitration clause — meaning the Council’s referral stands as a valid arbitration under the Arbitration Act.
The judge noted that the arbitrator had considered correspondence and admitted liabilities, making the award “discernible and intelligible.” Finding no trace of patent illegality or perversity, the Court upheld the award and ordered TN Salt to pay ₹1.5 lakh in costs to Aero Plast.
A costly reminder, perhaps, that silence in arbitration is never golden.
